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Evaluating Asset Bubbles within Cryptocurrencies using the LPPL Model

By Rafal Rokosz

The advent of blockchain technology has created a new asset class named cryptocurrencies that have experienced tremendous price appreciation leading to speculation that the asset class is experiencing an asset bubble. This paper examines the novelty and functionality of cryptocurrencies and potential factors that may lead to conclude the existence of an asset bubble. To empirically evaluate whether the asset class is experiencing an asset bubble the LPPL model is used. The LPPL model was able to successfully identify two of the four crashes within the data set signifying that cryptocurrencies are within an asset bubble.

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Advisors: Ed Tiryakian and Grace Kim | JEL Codes: G12, Z00, C60

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